Difference Between Gold Loan and Home Loan

Difference Between Gold Loan and Home Loan

Looking for a way to get out of a financial bind? 

Here are some of the options that one can avail of for arranging immediate funds –

  • Taking help from family and friends,
  • Asking for an advance salary,
  •  Getting a quick loan
  • Availing an overdraft facility from a bank. 

Among all the given choices, taking out a loan is the best option since it is the quickest and most convenient option to obtain funds. Now, deciding on which loan to take could be the crucial part. Gold loans and home loans are the most popular ones because they are secured loans with attractive interest rates. 

Let us look at what gold loans and home loans are-

A gold loan requires a guarantee of gold jewellery or gold coins as security, while home loans are planned to cover the expenses such as down payment, renovations, after-purchase modifications, and furniture purchases.

Let us take a closer look to understand the distinctions between a home loan and a gold loan. 

  • Rates of Interest– Interest rates are a vital consideration when applying for any form of a loan. Since the borrower will be giving the gold to the lender, the lender feels a far lower risk in granting the loan. 

On the other hand, home loans have both fixed and variable interest rates that could typically go up to 18 percent. 

Hence, interest rates are much lower in gold loans in comparison to home loans. Muthoot gold loan interest rates are very affordable which start at as low as 11.99%. 

  • End-Use– The loan amount obtained through the Gold Loan scheme can be applied to any need such as a child’s wedding, higher education, business expansion, and so on. This is also one of the reasons for its customer appeal.

Whereas, home loans are used only to finance the purchase or building of a home.

  • Documentation-  To apply for a gold loan, one does not need to give a wide range of documents. They will only need some primary KYC paperwork (Id proof and Address proof) and passport-size pictures to get started. 

However, home loans require a comprehensive set of documents that includes valid residence proof, proof of identity, bank statements for the last three months (for self-employed), and salary slips with ITR or Form 16 (for employed persons). If any of the given documents are missing, the home loan application may get delayed.

  • Eligibility criteria– The gold loan, unlike other loans, has no strict eligibility restrictions such as income, occupation, or CIBIL score. The only requirement for a gold loan is that the borrower has gold of 18-24 karat quality to utilize as collateral. If one possesses gold and is between the ages of 18 and 65, they can borrow money against it. Only the value and purity of their gold will determine the loan amount. By entering the number and weight of the gold ornament into the Muthoot gold loan calculator, one can find out how much one may borrow against it.

In comparison to gold loans, the eligibility standards for a home loan are more complex to meet.

To be eligible for a home loan, one must be a resident of India and between the ages of 21 and 65 at the time of loan maturity. The individual must be employed or self-employed and have a bank account. The co-applicant for housing finance should also be the property’s co-owner. 

  • Repayment– When taking out a gold loan, one may be given several repayment options with which one can conveniently repay the debt. There are four repayment options: EMI, Interest Payment at Fixed Intervals (monthly/quarterly/half-yearly/yearly), Upfront Interest Payment, and Bullet Repayment. It also allows for partial payment and partial withdrawal.

On the contrary, home loans offer fixed or flexible repayment alternatives based on one’s income and comfort level via monthly EMIs. 

Based on these distinctions, one may readily determine which loan is the best fit for their financial requirements. 

Considering both the alternatives, opting for a gold loan to obtain an appropriate loan amount against one’s gold jewellery and coins could be a prudent move as it gives a wide range of repayment facilities and quick access to financing, however, such options in home loans are limited.

You can visit Muthoot Fincorp’s website for more information on gold loans https://www.muthootfincorp.com/gold-loan/.